India announces 12-point boost for economy to add to festival cheer

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Indian Finance Minister Nirmala Sitharaman on Thursday announced financial outlays for 12 sectors, including a fertiliser subsidy as well as those for housing and infrastructure that will likely drive demand for key commodities.

She said the announcement was the third instalment of Atma Nirbhar Bharat (Self Reliant India) programme that was meant to establish the country as a global hub for manufacturing and reduce import dependency.

The minister also said that there were several signs of a strong economic rebound already from the pandemic outbreak.

“This is not a pent up demand but a strong recovery. Nature of this rebound is sustainable strong economic growth,” Sitharaman said.    

Among the programmes announced on Thursday, the government said it would provide 650 billion rupees as fertiliser subsidy to farmers to help with the latest crop sowing. The area under the summer crop increased by around 17% this year on good monsoon rains.

Besides for revival of the housing sector, the government will expand the PM Awaaz Yojana, which  is meant to facilitate urban housing, by earmarking 180 billion rupees for the programme.

The minister said it will help the construction of 1.8 million houses that would result in additional steel and cement consumption of 2.5 million tons and 13.1 million tons respectively.

The government will also relax a norm, wherein upto 20% in the difference between the deal value and the circle rate of a property for sale won’t be treated as income tax.

Previously, the concession was for upto 10%. This facility will be available only upto end-June next year.

Boost for employment

Sitharaman also announced a programme covering 95% of the private enterprises whereby it will provide the employee provident fund for registered organisations for the next two years. 

However, this will cover those employees who are first time employees or those who lost their jobs between 31 March and 30 September 2020.

The programme is meant to drive up employment and boost consumption. That follows an earlier announcement by the government to provide encashable vouchers for leave travel programs in advance for government employees.

Sitharaman also announced emergency credit for 16 stressed services sectors that will be provided without any collateral and where the government will act as guarantor.

The government also announced fiscal incentives for boosting exports, providing more credit to infrastructure and employment generation programs for the rural poor including road construction in villages as well as other work under Mahatma Gandhi National Rural Employment Guarantee Act.

Thursday’s announcement comes a day after the government announced a production-linked incentive (PLI) programme worth $28 billion for as many as 10 sectors with the aim of establishing the country as a manufacturing hub.

The PLI scheme will include advance chemistry cell battery, food products, textile, speciality steel, pharmaceuticals, telecom and networking products, automobile and auto components, electronic products and white goods. 

“Our objective is that all the schemes should be out in the next 45 days,” said Amitabh Kant, Chief executive officer of Niti Aayog, the government think tank.

Economic rebound seen

Sitharaman expressed confidence that the programs would facilitate an economic rebound already evident in many sectors. 

On Wednesday, the Reserve Bank of India in a state of the economy report advanced its outlook for positive growth, saying that it will occur in the third quarter instead of a previous forecast of the fourth quarter of the fiscal year.

However, the central bank also said that the fiscal’s first half had entered into a technical recession for the first time in history. India had enforced the world’s strictest lockdown in March to check the spread of the COVID-19 virus. 

Sitharaman highlighted that concerns about the economy were easing following good performance indicators recently.  The composite PMI, which indicates factory activity, reached its highest level in nine years in October. Energy consumption growth was up 12% in October on year, while the Goods and Services Tax collection in October rose by 10% to 1.05 trillion rupees.

At the same time, the daily railway freight tonnage has grown by 20% on year, while bank credit increased by 5.1% during the same month, according to the minister.

Biman Mukherji is a columnist and consulting editor at Indoasiancommodities.com. He has worked for international news organisations such as Reuters, The Wall Street Journal as well as for newspapers like The Times of India. He can be reached at biman.mukherji@indoasiancommodities.in

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